Trusting AI in Competitive Markets

Abstract

People's trust in AI advice diverges as they use it, deepening for some and eroding for others. We study this divergence in oligopoly pricing, where advice cannot prove itself: rivals' responses decide whether it pays off. In a laboratory experiment, 273 sellers compete across 91 three-seller markets over 30 rounds; we vary the presence of AI pricing recommendations and the gender composition of the market (female-only, male-only, or mixed). We find that the gender composition of the market shapes how sellers learn from the advice, and where prices settle as a result. In female-only markets, recommendations raise prices by 29% and profits by 39%; in male-only and mixed-gender markets, they have no significant effect. A Non-Homogeneous Hidden Markov Model reveals a composition-specific dynamic association: profitable rounds predict rising adherence to the AI in female-only markets and declining adherence otherwise, a pattern consistent with learned trust and self-serving attribution. The pattern reverses what recent evidence on gender and AI would predict. We discuss implications for platform governance and regulatory oversight, which should focus not only on the algorithm but on the human side that shapes its effects.